RMAFC set to audit Deposit Money Banks over stamp duty collections
RMAFC set to audit DM Banks over stamp duty collections
The Revenue Mobilization Allocation and Fiscal Commission (RMAFC or “the Commission”) has recently indicated its intention to commence forensic investigation on 22 Deposit Money Banks (DMBs) over their stamp duty collections from 2000 to 2018.
According to RMFAC, the exercise became necessary in view of the perceived failure of DMBs to adequately charge and collect stamp duties on qualifying transactions, particularly the ₦50 stamp duties collectible by DMBs on qualifying bank transactions. The Commission, therefore, sought and obtained the approval of the National Executive Council (NEC) to probe stamp duty-related accruals to the Federation Account in line with its constitutional mandate.
RMAFC audits have been a stay-awake issue for Nigerian banks in recent years. In 2014, RMAFC conducted verification exercises on various DMBs in Nigeria which resulted in significant exposures for some banks. The exercise initially covered the period 2008 to 2012 but was later extended to cover 2013 to 2015. In essence, RMAFC would practically be re-auditing years covered by the verification exercises it concluded barely a year ago.
Technically speaking, there are questions about the legality of the proposed forensic investigation exercise. First and foremost, the FIRS is the body statutorily empowered by the FIRS (Establishment) Act and Stamp Duties Act (SDA) to administer stamp duties on transactions involving companies (DMBs in this case). Consequently, it is the FIRS – and not RMAFC – that should be responsible for verifying the adequacy of stamp duties collected by DMBs. Although the 1999 Constitution of Federal Republic of Nigeria and the RMAFC Act empower the Commission to monitor accruals to the Federation Account, the jury is still out on whether such powers extend to audit or investigation of taxpayers, or whether the NEC approval can confer such powers.
Secondly, the legality of the power of DMBs to charge and collect the ₦50 stamp duty that RMAFC seeks to investigate, is questionable. Although the SDA imposes stamp duty on receipts, “receipts given for money deposited in any bank or with any banker” are specifically exempted in the Schedule to the Act. While the National Assembly has attempted to remove this exemption through the SDA (Amendment) Bill 2018, until the Bill has been enacted, it cannot be given the force of the law. What is more, the Federal High Court (FHC) in Retail Supermarkets Nigeria Limited vs Citibank Nigeria Limited & Central Bank of Nigeria (“the Respondents”) has held that the Central Bank of Nigeria lacked the power to direct DMBs to charge ₦50 stamp duty on receipts issued for services rendered in respect of electronic fund transfers and teller deposits via its Circular Number CBN/GEN/DMB/02/006. The FHC in its judgment relied on the legal precedent set by the Court of Appeal in a similar case involving Standard Chartered Bank Nigeria Limited and Kasmal International Services & 22 Others.
The above judgments raise the following critical questions:
- Can RMAFC legitimately demand the ₦50 stamp duties from DMBs that did not charge or collect the duties in compliance with valid court decisions?
- Would RMAFC refund allegedly unremitted stamp duties it collects from DMBs in the event that Nigerian courts subsequently rule that the stamp duties were collected by the DMBs illegally and should be refunded to the affected customers?
- Why is RMAFC seeking to commence forensic investigation on DMBs from 2000 when the CBN Circular that introduced the ₦50 stamp duty was issued in 2016?
In light of the above, RMAFC would need to approach its proposed forensic investigation with caution. This is especially because the recent spate of multiple and multi-agency audits in Nigeria has become a major pain-point for taxpayers in Nigeria. We also hope the Stamp Duties (Amendment) Bill, 2018 initiated by the National Assembly will be reviewed to address some of the fundamental issues affecting the stamp duties regime in the country.
Meanwhile, RMAFC’s intention to conduct stamp duty investigation on DMBs is a wake-up call for the affected banks to review their records, both as revenue collection agents of the Federal Government and taxpayers, and regularize their position where there are gaps in readiness for the RMAFC’s investigation.
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